Equity-based compensation has long been used as a tool to attract, retain and motivate key employees and management. With the increase in new-economy companies in Hong Kong, how is equity-based compensation changing?

Equity-based awards issued to employees by Hong Kong companies have historically revolved around traditional awards such as share options and the award/purchase of shares. The proliferation of new-economy companies and professional investors backing these companies have resulted in a growing appetite for alternative arrangements, which align employee and shareholder interests, while managing dilution of control. Given the new listing regime in Hong Kong, KPMG China expects to see this trend continue.

This document looks at equity-based compensation from various angles, including the tax and accounting perspectives, as well as the opportunities and potential risks.